Narottamka Commodities Pvt. Ltd., , Mumbai V. Principal CIT - 1, Kolkata , Kolkata

ITA 1456/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0278 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 06-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Opportunity of being heard; Accommodation entries; Prejudicial to interest; Cancellation of registration; Set aside
• Section: 143(3); 133A; 12A; 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NOS.1456 & 1457/KOL/2018 ( / ASSESSMENT YEARS:2008-09 & 2009-10) NAROTTAMKA COMMODITIES PVT. LTD. ADMIN OFFICE A/503, RAASAZ CASTLE CHS LTD. MALPADONGRI NO. 1, WESTERN EXPRESS HIGHWAY, ANDHERI EAST, MUMBAI, MAHARASTHRA-400093. VS. THE PR. COMMISSIONER OF INCOME TAX (PR. CIT), KOLKATA ./ ./PAN/GIR NO.: AAACN 8807 B (ASSESSEE) .. (REVENUE) ASSESSEE BY :SHRI BHARAT KUMAR, CA RESPONDENT BY : DR. P.K. SRIHARI, CIT DR / DATE OF HEARING : 25/04/2019 /DATE OF PRONOUNCEMENT : 28/06/2019 / O R DE R PER DR. A. L. SAINI: THE CAPTIONED TWO APPEALS FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEARS 2013-14 AND 2014-15 ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LD. PR. COMMISSIONER OF INCOME TAX-1, KOLKATA UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) BOTH DATED 27.0 3.2018. 2.SINCE, THE ISSUES INVOLVED IN THESE TWO APPEALS A RE COMMON AND IDENTICAL; THEREFORE, THESE APPEALS HAVE BEEN HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, TH E GROUNDS AS WELL AS THE FACTS NARRATED IN ASSESSEES APPEAL IN I.T.A. NO. 1456/KO L/2018, FOR ASSESSMENT YEAR 2013-14, HAVE BEEN TAKEN INTO CONSIDERATION FOR DEC IDING THE ABOVE APPEALS EN MASSE . NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 2 22 2 3. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENG ED THE CORRECTNESS OF THE ORDER DT 27.03.2018, PASSED BY THE LD. PCIT. THE GRIEVANC ES RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) PASSED BY THE LEARNED PRINCIPAL COMM ISSIONER OF INCOME TAX, KOLKATA (HEREINAFTER REFERRED TO AS THE PCIT ) IS WITHOUT JURISDICTION AND BAD IN LAW AS ALSO ON FACTS AND DE SERVES TO BE QUASHED AND MAY KINDLY BE QUASHED. 2. THE LEARNED PCIT ERRED ON FACTS AS ALSO IN LAW IN ALLEGING THAT THE ORDER U/S 143(3) OF THE ACT IS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE AS THE ASSESSING OFFICER (AO) HAS NOT M ADE ANY INDEPENDENT INQUIRY/ VERIFICATION IN DETAILS / EXPLANATION SUBM ITTED BEFORE HIM IN RESPECT OF DONATION MADE. 3. THE LD. PCIT FURTHER ERRED ON FACTS IN NOT PROPE RLY CONSIDERING THE FACTS ON RECORD AND APPELLANTS SUBMISSIONS. THE ORDER U /S 263 OF THE ACT PASSED BY THE LD. PCIT IS TOTALLY UNJUSTIFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE QUASHED. 4. YOUR HONORS APPELLANT CRAVES LEAVE TO ADD, TO AMEND, ALTER , OR WITHDRAW ANY OR MORE GROUNDS OF APPEAL ON OR BEFORE THE HEARING OF APPEAL. 5. THE PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLK ATA HAS ERRED ON FACTS AND IN LAWS IN SETTING ASIDE ASSESSMENT ORDER PASSE D BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), KOLKATA. 4. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS: THE ASSESSEE A RESIDENT COMPANY IN INDIA AND FILED ITS RETURN OF INCOME FOR THE A.Y. 2013-14, WHICH WAS ASSESSED BY THE DEPARTMENT UNDER SECTION 143(3) OF THE ACT, ON 31.03.2016 AT A TOTAL INCOME OF RS.3,00,05,920/- . LATER ON, THE PR. COMMISSIONER OF INCOME TAX-1, KOLKATA, EXERCISED HI S JURISDICTION UNDER SECTION 263 OF THE ACT. THE PR. COMMISSIONER OF INCOME TAX (PCIT) NOTICED F ROM THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE THAT THE ASSESSEE HAD CLAIMED WEIGHTED AVERAGE DEDUCTION U/S35(1)(II) OF THE ACT TO THE TUNE OF RS .1,75,00,000/-, AGAINST DONATION MADE TO SCHOOL OF HUMAN GENESIS & POPULATIONHEALTH( SHG&PH) OF RS.1,00,00,000/- DURING THE FINANCIAL YEAR 2012-13. A SURVEY OPERATION WAS NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 3 33 3 CONDUCTED BY THE INVESTIGATION WING AGAINST THE INS TITUTION SCHOOL OF HUMAN GENESIS &POPULATION HEALTH (SHG &PH). THIS INSTITUT ION WAS APPROVED UNDER SECTION 35(L)(II) OF THE I. T. ACT,1961 AS A SCIENT IFIC RESEARCH. THE INVESTIGATION WING REVEALED THAT INSTEAD OF THE RESEARCH WORKS, T HIS INSTITUTE WAS ENGAGED IN THE TAX EVASION BY PROVIDING ACCOMMODATION ENTRIES IN T HE NATURE OF BOGUS DONATION. BOGUS DONATIONS WERE TAKEN VIDE CHEQUE /RTGS AND TH EREAFTER THE SAME WAS ROUTED BACK TO THE DONOR IN THE FORM OF CASH AFTER TAKING COMMISSION VIDE 3-4 LAYERS. MOREOVER, SHG&PH ADMITTED BEFORE THE SETTLE MENT COMMISSION THAT IT ACCEPTED CHEQUE TOWARDS DONATIONS AND REFUNDED SIMI LAR AMOUNT AFTER RETAINING SERVICE CHARGES FOR ITSELF. THEREFORE, LD PCIT OBSE RVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE PROPER VERIFICATION OF THE DETAILS REGARDING ACCOUNTS AND BANK STATEMENTS OF THE CONCERNS INVOLVED IN 3-4 LAYERS ROUTE WERE NOT DONE BY AO. THEREFORE, THE LD PCIT WAS OF THE VIEW THAT THE DEDUCTION U/S 35(1)(II) AMOUNTING TO RS.1,75,00,000/-, CLAIMED BY THE ASSE SSE WAS NOT DISALLOWED BY AO WHILE PASSING ASSESSMENT ORDER U/S 143(3) OF THE I. T. ACT,1961, WHICH HAD RESULTED IN UNDERASSESSMENT OF INCOME OF RS.1,75,00 ,000/-. HENCE, THE PRINCIPAL COMMISSIONER OF INCOME TAX (PCIT) WAS SATISFIED THA T IT WAS A CASE OF ERRONEOUS ASSESSMENT INSOFAR AS IT WAS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE ASSESSEE WAS REQUESTED TO SHOW CAUSE, AS TO WHY THE PROVISIONS OF SECTION 263 OF THE ACT SHOULD NOT BE INVOKED IN THIS CASE AND THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER SHOULD NOT BE REVISED / MODIFIED OR SET-ASIDE. 5. IN RESPONSE TO THE NOTICE ISSUED BY THE LD PCIT, THE ASSESSEE FILED THE WRITTEN SUBMISSION WHICH IS REPRODUCED BELOW: NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 4 44 4 NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 5 55 5 NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 6 66 6 NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 7 77 7 NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 8 88 8 6. HOWEVER, THE LD. PCIT REJECTED THE CONTENTION OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE, AN NBFC COMPANY, HAD CLAIMED DEDUCTIO N U/S 35(1)(II) OF THE ACT TO THE TUNE OF RS.1,75,00,000/-, AGAINST DONATION MADE TO SCHOOL OF HUMAN GENESIS OF POPULATION HEALTH (SHGPH IN SHORT) OF RS. 1,00,0 0,000/ - DURING THE RELEVANT YEAR. THIS CLAIM WAS ALLOWED BY AO WHILE PASSING TH E IMPUGNED ASSESSMENT ORDER U/S 143(3) OF THE ACT. IT TRANSPIRES THAT M/S SHGPH , IN ITS APPLICATION BEFORE THE HON'BLE INCOME TAX SETTLEMENT COMMISSION (ITSC), KO LKATA BENCH, ADMITTED TO NOT PERFORMING ANY FUNCTION OF RESEARCH EXCEPT RETU RN OF DONATIONS TO DONORS AFTER CHARGING THEIR COMMISSION. THEY ACCORDINGLY OFFERED THEIR EARNINGS BY WAY OF COMMISSION AS UNDISCLOSED INCOME AND THE HON'BLE IT SC VIDE ORDER U/S 245D(4) OF THE INCOME TAX ACT, 1961, DATED 22.07.2016 ADMIT TED THE DISCLOSURE MADE BEFORE THEM. THEREAFTER, M/S SHGPH WAS DENOTIFIED A S PER NOTIFICATION NO. 82/2016/F.NO.203/64/2009/ITA-II, DATED 15.09.2016 F OR REASONS ENUMERATED IN THE SHOW CAUSE NOTICE. THE LD PCIT FURTHER NOTICED THAT IN THE ASSESSEE`S CASE THE ASSESSMENT FOR THE YEAR WAS COMPLETED ON 31.03.2016 U/S 143(3) OF THE ACT. THE AO HAD ASKED FOR SUBSTANTIATION OF CLAIM ON ACCOUNT OF DONATIONS AND THE SAME WAS ALLOWED AS FRAUDULENT CLAIM AND BOGUS DONATION WAS NOT DETECTED. IT WAS ALSO STATED THAT APPROVAL TO M/S SHGPH WAS IN FORCE DURI NG THAT POINT OF TIME. ASSESSEE, HOWEVER ADMITS THAT SUMMONS U/S 131 TO M/ S SHGPH BY AO WAS NOT COMPLIED WITH. IN OTHER WORDS, THE IMPUGNED ASSESSM ENT ORDER COULD NOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVE NUE. THE FACT OF THE MATTER IS THAT M/S SHGPH TURNED OUT TO BE A FAKE INSTITUTION. SO, DONATIONS TO IT IN THE GARB OF SCIENTIFIC/MEDICAL RESEARCH AND CLAIMING WEIGHED DE DUCTION OF 175% U/S 35(1)(II) NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 9 99 9 OF THE ACT, WHICH WAS ALLOWED BY THE AO THEN, HAVE CAUSED LOSS OF REVENUE WHICH NATURALLY MAKES THE IMPUGNED ASSESSMENT ORDER ERRON EOUS AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD PCIT HELD THAT THE AO DID NOT CONDUCT VERIFICATION OF DETAILS REGARDING ACCOUNTS, BANK STATEMENT OF CO NCERNS INVOLVING 3-4 LAYER ROUTES. 7. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, AS EXPLAINED ABOVE, THE LD. PCIT HELD THAT IMPUGNED ASSESSMENT ORDER DATED 31.0 3.2016 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT,IS ERRONEOU S INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THELD PCIT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO PASS FRESH AS SESSMENT. 8. AGGRIEVED BY THE ORDER OF THE LD PRINCIPAL COMMI SSIONER OF INCOME TAX (PCIT) U/S 263 OF THE ACT, THE ASSESSEE IS IN APPEAL BEFOR E US. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFOR E US THAT SHOW CAUSE NOTICE ISSUED BY PR. CIT U/S 263(1) IS WITHOUT ANY BASE, A S THE ORDER PASSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THE LD. COUNSEL FOR THE ASSESSEE TOOK US T HROUGH THE SHOW CAUSE NOTICE ISSUED BY LD. PCIT, WHICH IS BEING REPRODUCED BELOW FOR READY REFERENCE: SUB: SHOW CAUSE NOTICE U/S 263(1) OF THE I TACT,19 61 IN RESPECT OF ASSESSMENT ORDER FOR A.Y. 2013-14 - MATTER REGARDING, WHEREAS THE UNDERSIGNED HAD CALLED FOR AND EXAMINED THE RECORD OF YOUR CASE AND IT IS CONSIDERED THAT THE IMPUGNED ASSESSMENT O RDER PASSED U/S143(3) OF THE INCOME TAXACT, 1961 BY THE ACIT, CIRCLE-2(2), KOLK ATA ON 31.03.2016 FOR AY. 2013-14 DETERMINING A TOTAL INCOME OF RS.3,00,05,92 0/- IS, PRIMA FACIE, ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE FOLLOWING REASONS: I) EXAMINATION OF THE RECORD IT WAS OBSERVED FROM THE COMPUTATION OF THAT ASSESSEE HAD CLAIMED AS WEIGHTED AVERAGE DEDUCTION U/S. 35(1)(II) OF RS. 1,75,00,000/- AGAINST DONATION MADE TO SCHOOL OF HU MAN GENESIS & POPULATION HEALTH(SHG&PH)OF RS.1,00,00,000/- DURING THE FINANCIAL YEAR 2012-13. A SURVEY OPERATION WAS CONDUCTED BY THE IN VESTIGATION WING AGAINST THE INSTITUTION SCHOOL OF HUMAN GENESIS & P OPULATION HEALTH(SHG &PH). THIS INSTITUTION WAS APPROVED U/S 35(1)(II) OF THEI.T.ACT,1961 AS A SCIENTIFIC RESEARCH. INVESTIGA TION WING REVEALED THAT INSTEAD OF THE RESEARCH WORKS, THIS INSTITUTE WAS E NGAGED IN THE TAX EVASION BY PROVIDING ACCOMMODATION ENTRIES IN THE NATURE OF BOGUS DONATION. BOGUS DONATIONS WERE TAKEN VIDE CHEQUE /RTGS AND TH EREAFTER THE SAME WAS ROUTED BACK TO THE DONOR IN THE FORM OF CASH AF TER TAKING COMMISSION NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 VIDE 3-4 LAYERS. MOREOVER, SHG&PHADMITTED BEFORE TH E SETTLEMENT COMMISSION THAT IT ACCEPTED CHEQUE TOWARDS DONATION S AND REFUNDED SIMILAR AMOUNT AFTER RETAINING SERVICE CHARGES FOR ITSELF. DURING THE COURSE OF ASSESSMENT PROPER VERIFICATION OF THE DETAILS RE GARDING ACCOUNTS AND BANK STATEMENTS OF THE CONCERNS INVOLVED IN 3-4 LAY ERS ROUTE WERE NOT DONE. THE DEDUCTION U/S 35 (1)(II) AMOUNTING TO RS. 1,75,00,000/- AS CLAIMED BY THE ASSESSEE WAS NOT DISALLOWED WHILE PA SSING ASSESSMENT ORDER U/S 143(3) OF THE I.T.ACT,1961 RESULTED IN UN DERASSESSMENT OF INCOME OF RS.1,75,00,000/- AND UNDERCHARGE OF TAX OF RS.56 ,77,875/-. II) AO HAS PASSED THE IMPUGNED ASSESSMENT ORDER WITHOU T MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE IN THIS CASE. 2. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW AND IN ACCORDANCE WITH THE PROVISIONS OF SEC. 263( 1) OF I . T. ACT, 1961 YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD TO SHOW CAUSE A S TO WHY THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143(3) BY DCIT, CIRCLE - 3(1), KOLKATA ON 31.03.2016 FOR A.Y. 2013-14 SHOULD NOT BE HELD AS E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. YOU MA Y ACCORDINGLY FURNISH YOU WRITTEN SUBMISSIONS U/S 263( 1) OF I.T.ACT, 1961 ON OR BEFORE 27.02.2018 AT 1:30 P.M. IN THIS REGARD, EITHER PERSONALLY OR THROUGH A N AUTHORISED REPRESENTATIVE ELABORATING AND/OR EVIDENCING YOUR CONTENTIONS / SU BMISSIONS. 3. IN CASE OF FAILURE TO RESPOND TO THIS NOTICE, A DECISION MAY BE TAKEN ON THE MERITS OF THE CASE WITHOUT PROVIDING FURTHER OPPORT UNITIES AND IT SHALL BE PRESUMED THAT YOU HAVE NO OBJECTION TO THE PROPOSED ACTION. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE T HE BENCH THAT AT THE TIME OF MAKING DONATION THE CERTIFICATE OF REGISTRATION WAS VALID AND EFFECTIVE U/S 35(1) (II) OF THE ACT IN THE HANDS OF THE DONEE, WHEN THE DONOR MADE THE DONATION THEREFORE, DEDUCTION SHOULD BE ALLOWED IN THE HANDS OF THE ASSESSEE (DONOR), EVEN IF THE REGISTRATION CERTIFICATE OF THE TRUST IS CAN CELLED BY THE APPROPRIATE AUTHORITY AFTER MAKING THE DONATION. HENCE, THE ASSESSING OFF ICER HAS TAKEN A POSSIBLE VIEW THEREFORE, ORDER PASSED BY HIM UNDER SECTION 143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 10. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUBMITTED BEFORE US THAT THE ASSESSEE ADMITTED THAT SUMMONS U/S 131 TO M/S SHGPH BY AO WA S NOT COMPLIED WITH. THE FACT OF THE MATTER IS THAT M/S SHGPH TURNED OUT TO BE A FAK E ACCOMMODATION PROVIDING INSTITUTION. SO, DONATIONS TO IT IN THE GARB OF SCI ENTIFIC/MEDICAL RESEARCH AND CLAIMING WEIGHED DEDUCTION OF 175% U/S 35(1)(II) OF THE ACT, WHICH WAS ALLOWED BY THE AO THEN, NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 HAVE CAUSED LOSS OF REVENUE WHICH NATURALLY MAKES T HE IMPUGNED ASSESSMENT ORDER ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF R EVENUE. THEREFORE, THE LD PCIT HELD THAT THE AO DID NOT CONDUCT VERIFICATION OF DE TAILS REGARDING ACCOUNTS, BANK STATEMENT OF CONCERNS INVOLVING 3-4 LAYER ROUTES. T HE LD DR FURTHER SUBMITTED THAT CERTIFICATE UNDER SECTION 35(1) (II) OF DONEE ORGAN ISTAION, M/S SHGPH WAS CANCELLED BY THE GOVERNMENT AS PER NOTIFICATION NO. 82/2016/F.NO.203/64/2009/ITA-II DATED 15.09.2016. H ENCE, LD PCIT HAS RIGHTLY EXERCISED HIS JURISDICTION UNDER SECTION 263 OF THE ACT AND THEREFORE ORDER PASSED BY THE LD PCIT SHOULD BE UPHELD. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LAW WITH REGARD TO EXERCISE OF JUR ISDICTION U/S.263 OF THE ACT ON THE GROUND THAT THE AO FAILED TO MAKE ENQUIRIES WHI CH HE OUGHT TO HAVE MADE IN THE GIVEN CIRCUMSTANCES OF A CASE IS WELL SETTLED. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUM STANCES OF THE CASE THE INCOME- TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFO RE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REM AIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR F URTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETU RN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAU SE IT IS INCUMBENT ON THE INCOME- TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD 'E RRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE O RDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT B ECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREI N ARE ASSUMED TO BE CORRECT. WE DERIVE SUPPORT FOR THE PROPOSITION AS STATED ABOVE FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES 99 ITR 375 (DEL). 12.WE NOTE THAT T HE ASSESSEE COMPANY HAS CHALLENGED IN THE FIRST PLA CE, THE VERY USURPATION OF JURISDICTION BY LD. PRINCIPAL CIT TO INVOKE HIS REVISIONAL POWERS ENJOYED U/S 263 OF THE ACT. THEREFORE, FIRST WE HAV E TO SEE WHETHER THE REQUISITE JURISDICTION NECESSARY TO ASSUME REVISIONAL JURISDI CTION IS THERE EXISTING BEFORE THE NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 PR. CIT TO EXERCISE HIS POWER. FOR THAT, WE HAVE TO EXAMINE AS TO WHETHER IN THE FIRST PLACE THE ORDER OF THE ASSESSING OFFICER FOUN D FAULT BY THE PRINCIPAL CIT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR THAT, LET US TAKE THE GUIDANCE OF JUDICIAL PRECEDENCE LAID DOWN BY TH E HONBLE APEX COURT IN MALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 83(S C) WHEREIN THEIR LORDSHIP HAVE HELD THAT TWIN CONDITIONS NEEDS TO BE SATISFIED BEFORE EXERCISING REVISIONAL JURISDICTION U/S 263 OF THE ACT BY THE CIT. THE TWI N CONDITIONS ARE THAT THE ORDER OF THE ASSESSING OFFICER MUST BE ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE FOLLOWING CIRCUMSTANCES, THE OR DER OF THE AO CAN BE HELD TO BE ERRONEOUS ORDER, THAT IS (I) IF THE ASSESSING OFFIC ERS ORDER WAS PASSED ON INCORRECT ASSUMPTION OF FACT; OR (II) INCORRECT APPLICATION O F LAW; OR (III)ASSESSING OFFICERS ORDER IS IN VIOLATION OF THE PRINCIPLE OF NATURAL J USTICE; OR (IV) IF THE ORDER IS PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIN D; (V) IF THE AO HAS NOT INVESTIGATED THE ISSUE BEFORE HIM; THEN THE ORDER P ASSED BY THE ASSESSING OFFICER CAN BE TERMED AS ERRONEOUS ORDER. COMING NEXT TO TH E SECOND LIMB, WHICH IS REQUIRED TO BE EXAMINED AS TO WHETHER THE ACTIONS O F THE AO CAN BE TERMED AS PREJUDICIAL TO THE INTEREST OF REVENUE. WHEN THIS A SPECT IS EXAMINED ONE HAS TO UNDERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HEL D THAT THIS PHRASE I.E. PREJUDICIAL TO THEINTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. THEIR LORDSHIP HE LD THAT IT HAS TO BE REMEMBERED THAT EVERY LOSS OF REVENUE AS A CONSE QUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSING OFFICER ADOPTED ONE OF THE COURS ES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS TO THE REVENUE, OR WHERE TWO V IEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAI NABLE IN LAW. 13. NOW, COMING TO THE FACTS OF THE CASE OF THE ASS ESSEE COMPANY, WE NOTE THAT ASSESSEE, IS A NBFC COMPANY AND MADE A DONATIONS TO M/S SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH AND CLAIMED WEIGHTE D DEDUCTIONS FOR THE ABOVE MENTIONED TWO ASSESSMENT YEARS UNDER SECTION 35(1) (II) OF THE ACT. THE AO, AFTER NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 TAKING NOTE OF THE GAZETTE NOTIFICATION DATED 28.01 .2010, ISSUED BY THE CBDT, WHICH RECOGNIZED M/S SHGPH AS AN INSTITUTION WHICH WAS ENTITLED FOR WEIGHTED DEDUCTION U/S 35(1)(II) OF THE ACT, ALLOWED THE WEI GHTED DEDUCTION FOR THE DONATIONS GIVEN BY IT. THE DETAILS REGARDING AMOUNT OF DONATION AND WEIGHTED DEDUCTION CLAIMED BY THE ASSESSEE FOR BOTH THE YEAR S ARE GIVEN BELOW: PARTICULARS AY 2013-14 AY 2014-15 AMOUNT OF DONATION 1,00,00,000/- 1,80,00,000/- WEIGHTED DEDUCTION CLAIMED 1,75,00,000/- 3,15,00,00 0/- ASSESSEE REPLY TO ASSESSING OFFICER 22-28 OF P.B. 61-65 OF P.B. SHOW CAUSE NOTICE U/S 263 01-02 OF THE P.B. 36-37 OF THE P.B. REPLY OF SHOW CAUSE NOTICE ISSUED U/S 263 PAGE 02- 10 OF THE P.B. PAGE 38-45 OF THE P.B. DURING THE COURSE OF ASSESSMENT PROCEEDINGS (A.Y. 2 013-14) THE AO ASKED THE ASSESSEE, VIDE SHOW CAUSE NOTICE DATED 24.02.2016, TO EXPLAIN AS TO WHY THE DEDUCTION OF RS. 1,00,00,000/- CLAIMED BY IT U/S 35 (1)(II) OF THE ACT, IN RESPECT OF DONATION MADE TO SHGPH BE NOT DISALLOWED SINCE THE ALLEGED DONATION MADE BY IT TO SHGPH WAS BOGUS. IN SUPPORT OF THE ALLEGATION MA DE BY THE ASSESSING OFFICER, HE FURNISHED TO THE ASSESSEE THE ORDER U/S 245(D)(1 ) OF THE ACT PASSED BY HONBLE SETTLEMENT COMMISSION IN THE CASE OF SHGPH AND THE COPY OF THE STATEMENT OF MR. SAMADRITA MUKHERJEE SARDAR RECORDED BY DDIT(INV ) UNIT4(3), KOLKATA RECORDED ON 27 TH JANUARY, 2015 IN COURSE OF SURVEY U/S 133A ON SHGP H. IN RESPECT OF ABOVE SHOW CAUSE NOTICE, ASSESSEE FILED A DETAILED REPLY (PAGE 22TO 28 OF PAPER BOOK). IT ALSO REQUESTED THE AO TO ALLOW T O CROSS-EXAMINE THE WITNESS WHOSE STATEMENTS WERE RECORDED BEHIND ITS BACK. AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO ALLOWED THE CLA IM. WE NOTE THAT THE DONEE ORGANIZATION, M/S SCHOOL OF HUMAN GENETICS AND POPULATION HEALTH (SHGPH) IS SCIENTIFIC RESEARCH AS SOCIATION APPROVED BY THE CENTRAL GOVERNMENT UNDER SECTION 35(1) (II) OF THE INCOME TAX ACT AND PUBLISHED IN THE OFFICIAL GAZETTE OF INDIA. AT THE TIME OF MA KING DONATION BY ASSESSEE (DONOR) THE CERTIFICATE OF THE DONEE (SHGPH) U/S 35(1) (II) OF THE ACT WAS IN FORCE THEREFORE, THE ASSESSING OFFICER ALLOWED THE WEIGHT ED DEDUCTION TO THE ASSESSEE IN RESPECT OF THE DONATION MADE BY IT. THEREFORE, ACTI ON OF THE ASSESSING OFFICER IS NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 SUSTAINABLE IN LAW. THAT IS, WHEN THE ASSESSING OFF ICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS TO T HE REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ON E VIEW WITH WHICH THE PR. CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUEUNLESS THE VIEW TAKEN BY THE ASSESSIN G OFFICER IS UNSUSTAINABLE IN LAW. THEREFORE, WE ARE OF THE VIEW THAT ORDER PASSE D BY THE ASSESSING OFFICER U/S 143(3) IS NOT ERRONEOUS ORDER. 14. NOW WE DEAL WITH THE MAIN GRIEVANCE OF THE LD D R FOR THE REVENUE. THE LD DR SUBMITTED BEFORE US THAT CERTIFICATE UNDER SECTION 35(1) (II) OF DONEE ORGANISTAION M/S SHGPH WAS CANCELLED BY THE GOVERNMENT AS PER NO TIFICATION NO. 82/2016/F.NO.203/64/2009/ITA-II DATED 15.09.2016. H ENCE, LD PCIT HAS RIGHTLY EXERCISED HIS JURISDICTION UNDER SECTION 263 OF THE ACT AND THEREFORE ORDER PASSED BY THE LD PCIT SHOULD BE UPHELD. WE NOTE THAT THE WITHDRAWAL OF RECOGNITION U/S 35(1 )(II) OF THE ACT IN THE HANDS OF THE PAYEE ORGANIZATIONS WOULD NOT AFFECT THE RIGHTS AND INTERESTS OF THE ASSESSEE HEREIN FOR CLAIM OF WEIGHTED DEDUCTION U/S 35(1 )(I I) OF THE ACT, FOR THAT WE RELY ON THE JUDGMENT OF THE COORDINATE BENCH, KOLKATA, IN T HE CASE OF M/S MACO CORPORATION INDIA (P) LTD, ITA NO.16/KOL/2017, FOR ASSESSMENT YEAR 2013-14, WHEREIN IT WAS HELD AS FOLLOWS: '29. ALL THE THREE HIGH COURTS AFTER EXAMINING THE ISSUE, IN THE LIGHT OF THE OBJECT OF SECTION 12A OF THE ACT AND SECTION 21 OF THE GENERAL CLAUSES ACT HELD THAT THE ORDER OF THE CIT PASSED UNDER SECTION 12A IS QUASI JUDICIAL IN NATURE. SECOND, THERE WAS NO EXPRESS PROVISION I N THE ACT VESTING THE CIT WITH POWER OF CANCELLATION OF REGISTRATION TILL 01.10.2004; AND LASTLY, SECTION 21 OF THE GENERAL CLAUSES ACT HAS NO APPLIC ATION TO THE ORDER PASSED BY THE CIT UNDER SECTION 12A BECAUSE THE ORD ER IS QUASI JUDICIAL IN NATURE AND IT IS FOR ALL THESE REASONS THE CIT HAD NO JURISDICTION TO CANCEL THE REGISTRATION CERTIFICATE ONCE GRANTED BY HIM UN DER SECTION 12A TILL THE POWER WAS EXPRESSLY CONFERRED ON THE CIT BY SECTIO N 12AA(3) OF THE ACT W.E.F 01.10.2004. WE HOLD THAT THE RATIO DECIDENDI OF THE AFORESAID J UDGMENT OF THE HON'BLE APEX COURT WOULD SQUARELY BE APPLICABLE TO THE FACT S OF THE INSTANT CASE. IN FACT THE ASSESSEE'S CASE HEREIN FALLS ON A MUCH BETTER FOOTING THAN THE FACTS BEFORE THE HONBLE APEX COURT. IN THE CASE BE FORE HONBLE APEX COURT, THE POWER OF CANCELLATION OF REGISTRATION U/ S 12A OF THE ACT WAS CONFERRED BY THE ACT ON THELD CIT W. E. F. 1. 10.2 004 AND THE HON'BLE APEX COURT HELD THAT PRIOR TO THAT DATE, NO CANCELLATIO N OF REGISTRATION COULD HAPPEN. BUT IN THE INSTANT CASE, THERE IS ABSOLUTEL Y NO PROVISION FOR WITHDRAWAL OF RECOGNITION U/S 35(1)(II) OF THE ACT. HENCE WE HOLD THAT THE NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 15 55 5 WITHDRAWAL OF RECOGNITION U/S 35(1)(II) OF THE ACT IN THE HANDS OF THE PAYEE ORGANIZATIONS WOULD NOT AFFECT THE RIGHTS AND INTE RESTS OF THE ASSESSEE HEREIN FOR CLAIM OF WEIGHTED DEDUCTION U/S 35(1 )(I I) OF THE ACT,' 1N VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDE NTS RELIED UPON HEREINABOVE, WE NOTE THAT ASSESSING OFFICER HAS ACTED WITHIN THE FO UR CORNERS OF LAW. WE ALSO NOTE THAT STATEMENTS RECORDED BY THE DEPARTMENT DO NOT C ONTAIN ANY EVIDENCE THAT THE MONEY DONATED BY THE ASSESSEE (DONOR) RETURNED BAC K TO HIM, HENCE ORDER PASSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR P REJUDICIAL TO THE INTEREST OF THE REVENUE. 15. WE NOTE THAT THE ASSESSING OFFICER PASSED ORDER U/S 143(3) DATED 31.03.2016 AFTER GETTING HIMSELF FULLY SATISFIED ABOUT THE CLA IM OF THE DONATION MADE BY ASSESSEEU/S 35(1) (II) OF THE ACT. THE ASSESSEE HAD GIVEN DONATION OF RS.1,00,00,000/- TO M/S. SHGPH AND HAD CLAIMED WEIG HTED DEDUCTION U/S 35(1)(II) OF THE ACT, WHICH HAS TO BE ALLOWED PROVIDED THE AS SESSEE GIVES DONATION TO ANY UNDERTAKING WHICH HAS ITS OBJECTS OF SCIENTIFIC RES EARCH AND SUCH UNDERTAKING IS APPROVED FOR THE PURPOSE OF THIS CLAUSE BY THE PRES CRIBED AUTHORITY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS E XAMINED THIS FACT AND HAS CLEARLY MADE A FINDING OF FACT THAT M/S. SHGPH IS A N APPROVED UNDERTAKING U/S 35(1)(II) OF THE ACT AFTER PERUSAL OF GAZETTE OF I NDIA. IN SUCH A SCENARIO, THE ACTION OF THE A.O CANNOT BE HELD TO BE ERRONEOUS BE CAUSE THE CLAIM MADE BY THE ASSESSEE WAS VALID. IT HAS TO BE KEPT IN MIND THAT WHEN THE DONATION WAS GIVEN BY ASSESSEE TO M/S. SHGPH, THE UNDERTAKING WAS ENJOYIN G APPROVAL AS PER LAW. THE SUBSEQUENT CANCELLATION OF THE APPROVAL U/S 35(1)(I I) BY CENTRAL GOVT. CANNOT IN ANY WAY UNDERMINE THE CLAIM OF THE ASSESSEE FOR THE DONATION GIVEN BY HIM BECAUSE PARLIAMENT IN ITS WISDOM HAS ENVISAGED SUCH AN EVENTUALITY AND INSERTED BY TAXATION LAWS (AMENDMENT) ACT, 2006 WITH RETROSP ECTIVE EFFECT FROM 01.04.2006 AN EXPLANATION IN SECTION 35 OF THE ACT WHICH READS AS UNDER AN EXPLANATION TO SECTION 35(1)(II) WHICH READS AS UND ER: SECTION 35(1)(II) EXPLANATION THE DEDUCTION, TO WHICH THE ASSESSEE IS ENTITLED IN RESPECT OF ANY SUM PAID TO A RESEARCH ASSOCIATION, UNIVERSITY, COLLEGE OR OTHE R INSTITUTION TO WHICH NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 16 66 6 CLAUSE (II) OR CLAUSE (III) APPLIES, SHALL NOT BE D ENIED MERELY ON THE GROUND THAT, SUBSEQUENT TO THE PAYMENT OF SUCH SUM BY THE ASSESSEE, THE APPROVAL GRANTED TO THE ASSOCIATION, UNIVERSITY, COLLEGE OR OTHER INSTITUTION REFERRED TO IN CLAUSE (II) OR CLAUSE (III) HAS BEEN WITHDRAWN. FROM THE READING OF THE AFORESAID PROVISION, IT IS VERY CLEAR THAT THE PAYER (THE ASSESSEE HEREIN) WOULD NOT GET AFFECTED IF THE RECO GNITION GRANTED TO THE PAYEE HAD BEEN WITHDRAWN SUBSEQUENT TO THE DATE OF CONTRIBUTI ON BY THE ASSESSEE. HENCE, NO DISALLOWANCE U/S 35(1)(II) OF THE ACT COULD BE MADE IN THE INSTANT CASE EVEN IF THE APPROVAL HAS BEEN RESCINDED LATER AS IT HAPPENED IN THIS CASE. IT IS NOT THE CASE OF THE LD. PR. CIT THAT WHEN THE CONTRIBUTION OF RS.1, 00,00,000/- WAS MADE BY THE ASSESSEE TO M/S. SHGPH, IT WAS NOT RECOGNIZED U/S 3 5(1)(II) OF THE ACT, SO LEGALLY THE AOS ACTION TO ALLOW WEIGHTED DEDUCTION U/S 35( 1)(II) OF THE ACT CANNOT BE HELD TO BE ERRONEOUS. THEREFORE, THE A.OS ORDER DA TED 31.03.2016, CANNOT BE TERMED AS ERRONEOUS AND THEREFORE, THE ASSUMPTION O F REVISIONAL JURISDICTION OF THE LD. PR. CIT ITSELF DOES NOT SATISFY CONDITION PRECE DENT TO INVOKE THE JURISDICTION U/S 263 OF THE ACT FAILS. THE SUBSEQUENT DEVELOPMENTS I .E. CBDT NOTIFICATION RESCINDING THE RECOGNITION FOR M/S. SHGPH CANNOT B E A GROUND TO HOLD THAT A.OS ORDER ON 31.03.2016 IS ERRONEOUS IN THE LIGHT OF TH E EXPLANATION IN SECTION 35(1)(II) OF THE ACT (SUPRA). THEREFORE, IN ANY CASE THE ASSU MPTION OF REVISIONAL JURISDICTION OF THE LD. PR. CIT ITSELF DOES NOT SATISFY CONDITIO N PRECEDENT TO INVOKE THE JURISDICTION U/S 263 OF THE ACT AND, THEREFORE, THE ORDER IMPUGNED IS NOT SUSTAINABLE AND THEREFORE, THE ORDER IS REVERSED. 16. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 28.06.2019 SD/- ( S. S. GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 28/06/2019 ( SB, SR.PS ) NAROTTAMKA COMMODITIES PVT LTD.. ITA NOS.1456 & 1457/KOL/2018 ASSESSMENT YEARS:2013-14 & 2014-15 P PP PA AA AG GG GE EE E | || | 1 11 17 77 7 COPY OF THE ORDER FORWARDED TO: 1. NAROTTAMKA COMMODITIES PVT. LTD. 2. PR. CIT, KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES